Press Release

VIS Reaffirms Entity Ratings of Alliance Sugar Mills Limited

Lahore, February 07, 2024: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Alliance Sugar Mills Limited (ASML) at ‘A-/A-2’ (Single A Minus/A-Two). The medium to long-term rating of ‘A-’ signifies good credit quality; protection factors are adequate. Risk factors may vary with possible changes in the economy. Short-term rating of ‘A-2’ denotes good certainty of timely payments. Liquidity factors and company fundamentals are sound. Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on December 30, 2022.

ASML is a wholly owned subsidiary of RYK Mills Limited (RYK). RYK group is amongst the largest sugar manufacturers with cumulative sugarcane crushing capacity of around 36K tons per day (tpd) along with presence in power generation (30 MW of bagasse-based power plant) and ethanol manufacturing. ASML has been principally engaged in manufacturing and sale of sugar and its byproducts. Total sugarcane production in 2022-23 season was reported lower at 82.4m MT vis-à-vis 89.0m MT in the preceding year mainly due to heavy floods in the country. Sugar prices were consistently under pressure throughout the outgoing crushing season due to excessive sugar stocks available in the country while the Government allowed 250,000 MT of exports in the outgoing year. However, there was a significant surge in sugar prices after the season's conclusion, primarily in line with inflationary trends. Retail sugar prices, while remaining relatively elevated, have recently exhibited a downward trend due to the Government intervention aimed at reducing smuggling. Meanwhile, given higher indicative prices of sugarcane for the upcoming crushing season and lower available sugar stocks in the country, it is expected that sugar prices may increase, going forward. Nonetheless, the ratings do incorporate inherent cyclicality in crop levels and price vulnerability in sugar sector leading to competitive challenges for the company.

MY23 concluded with a significant growth in topline driven by nearly two-fold increase in volumetric sales of sugar, coupled with 29.8% increase in its selling prices. Sugar sales accounted for majority of the sales mix. Molasses sales were entirely made to distillery of RYK, which commenced operations in November 2023. Margins improved in MY23 in line with higher sales volumes owing to carry over stock and better prices, despite elevated financing cost. The debt service coverage exhibited improvement on the back of higher profitability. The leverage indicators also depict improvement primarily on account of augmentation in equity base and reduction in short-term financing as of Sep 30, 2023. ASML's debt profile primarily consists of short-term loans, while the percentage of long-term loans has diminished over time as a result of repayments. The Company has no plans to take on additional debt in the near to medium term. Going forward, realization of projected growth in revenues and profitability (aided by carryover sugar stock and higher average selling prices), along with maintenance of cash flow coverages and improvement in working capital management will remain important for ratings.

For further information on this rating announcement, please contact Ms. Tayyaba Ijaz, CFA at 042-35723411-12 (Ext. 8005) and/or the undersigned at 021-35311861-64 (Ext. 207) or email at

Maimoon Rasheed

Applicable Rating Criteria: Industrial Corporates (May 2023)

VIS Issue/Issuer Rating Scale

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